Friday, 22 June 2012

Smart Analytics for increasing the Multiplex Occupancies


Most airlines work on the ‘Last In, Premium rates’ (LIPR) variable price model for their tickets. Fair model in incentivizing early birds and capitalizing on the urgency needs of last-minute flyers. However, the movie business works on a completely different platform. With most multiplexes running at less than 20% occupancies beyond the opening weekend (even in case of major blockbusters), why can’t multiplex chains bring in some innovative pricing models? The theatrical overheads are constant regardless of the audience footfalls, so why aren’t the multiplexes milking the most out of their majorly vacant weekday shows?
The Multiplex Dilema: Weekday Afternoon slots running to Empty Seats

How about a variable pricing that is a complete contradiction of the Airline model. Capitalize on, make the most of the big-time movie buffs who can’t compromise on the first day (or opening weekend) viewing of their awaited blockbusters. ‘First In, Premium rates’ (FIPR) for all advance bookings. However, through Smart Analytics, multiplexes may want to continuously reduce their ticket prices closer to the time of movie shows. So for e.g. a movie may start at a regular price of Rs. 200. However, the variable pricing window could open about 2 hours prior to the actual show timings. Now, based on factors like no. of open seats and the buzz around the movie (star pull, reviews, actual Word of Mouth, audience trending, macro factors like say a festive weekend, vacations, a rainy day or a major sports semi-finals or finals, etc), Smart Analytics could keep coming up with continuous ‘Variable ticketing tickers’. Now, here is a model that incentivizes the movie-goer for his patience and buying into this uncertainty. It’s more like cheapest bidder wins. In this case, it’ll be the latest bidder gets the cheapest. But the inherent risk for that bidder being the ability to call the right shot, at the right moment. How long will one avoid buying in and run the risk of a 'Housefull' board.
For multiplexes, the approach is not about milking the most of those ‘urgent’ viewers. In movie business, perhaps urgency is never an issue, but passion is. The more passionate viewers will book-in early to avoid uncertainty. The less passionate will wait and bid for the cheapest price. The urgent viewers (Oops, I am late! But I have to catch this movie today at 7 PM at any cost. Nothing else will do! I can’t wait till the 8 PM show!) – think again, do you think such jerks exist? And even if they do, do you think it’s worthwhile for businesses to even consider them in their business models?
So here’s the situation, LIVE – a working weekday, 2 Hours prior to the 3 PM show of a major flick. Current occupancy (bookings) is at 40%. Current price: Rs. 200. Variable pricing ticker starts rolling at 1 PM. New Price: Rs. 180;
  • 1:15 PM, Occupancy 45%, Price: Rs. 160
  • 1:30 PM, Occupancy 55%, Price: Rs. 140
  • 1:45 PM, Occupancy 65%, Price: Rs. 120
  • 2 PM, Occupancy 70%, Price: Rs. 100
  • 2:15 PM, Occupancy 75%, Price: Rs. 80
  • 2:30 PM, Occupancy 80%, Price: Rs. 60
  • 2:35 PM, Occupancy 82%, Price: Rs. 55
  • 2:40 PM, Occupancy 85%, Price: Rs. 50
  • 2:45 PM, Occupancy 90%, Price: Rs. 45
  • 2:50 PM, Occupancy 95%, Price: Rs. 40
  • 2:59 PM, Occupancy 98%, Price: Rs. 30

Ofcourse, Multiplexes may want to still retain some minimum thresholds of pricing to maintain their crowd standards and ensure that their auditoriums do not become a snooze and fun adda for vagabonds. Dropping prices to ridiculous levels (Like say Rs. 20) will not just incentivize non-passionate viewers, but infact bring in a lot of non-viewers into the fray who are there just for the Air Conditioning, or in most cases, a cheap and comfy option to cozy-up and avoid the moral police.
Imagine, the plethora of opportunities, such a variable pricing structure could throw up –
  • Considering the gross costs involved (travel, parking, tickets, snacks, amusement, post-movie dinner), Multiplex movie watching still continues to be primarily a ‘By Appointment’ form of entertainment. However, a variable pricing structure could possibly bring in a new concept of ‘Casual’ movie watching (which is so prevalent in single screen cinemas).
  • Imagine, people strolling in a mall for some casual shopping or books on a lazy weekday. Now the variable ticker kicks-off. The latest Hollywood blockbuster is about to start in the next 20 minutes at just Rs. 50 (50% discount on regular prices). Doesn’t that sound like a cool deal? Wouldn’t it bring in some incremental footfall?
  • In today’s age of Smart phones, how about sharing this variable pricing through Bluetooth and BBMs or even bulk SMSs. Imagine, a group of college students discovering that their last lecture of Economics has been rescheduled. The Variable pricing informs about Avengers in the nearby multiplex for just Rs. 40. Isn’t that a compelling reason for these youngsters to venture in? A very logical case of unplanned, unscheduled, casual movie watching.
  • Variable pricing may also impact our movie watching habits. It might have a huge impact on the ‘Seconds’ market. People may want to re-watch their favorite blockbusters by availing such variable price bands.
  • On the other hand, niche movies, may find all the more reason for getting made, exhibited and making money. Most smaller films lose out on screen space (due to onslaught of blockbusters) and at times even have their shows cancelled due to minimal audience turnout. A variable pricing could ensure that such smaller movies have much higher probability of finding their niche audience.
  • For the multiplexes, it’s a simple ‘McDonaldisation’ of their business model. Just like the Happy Price Menu at McDonalds that intends to increase footfalls by introducing products in the Rs. 20 price band, a variable pricing structure is all about increasing footfalls during low-occupancy periods. And an increased footfall, by all means would spell good news for the ancillary high-margin business of food, snacks and popcorn.

To summarize, Smart Analytics could come very handy in filling up those critical vacant seats in most of our multiplexes. It could trigger the sweet spot of decision when a potential viewer is in two-minds about re-watching a favorite film or venturing for a niche film. It could bring in a lot more college-goers, young audience and action in the now-passive ‘Weekday afternoon’ slot. Youngsters less on money, but with a fair amount of time and inclination towards movies. It would definitely mean much more popcorn and an additional, legitimate revenue stream for the Production houses! Come to think of it, would you rather not watch Avengers in big 70 mm screen at Rs. 40, than a patchy pirated version on your PC?
Now, the cynics may still bring up a very valid question – “What if this ends up corrupting my premium audience? Won’t a guy who was willing to shell Rs. 200, now wait for the variable pricing to avail his ticket at much less?” The answer is yes, most probably yes! But won’t you rather let go a few premium customers and fill-up your vacant seats. Simple math - A show with 20% occupancy @ Rs. 200 against the same show with 60% occupancy @ Rs. 100 (average variable pricing).  To add, the 40% more footfalls could definitely mean incremental cola & popcorn (all the more reason, now that they’ve saved on their ticket cost!).
To further counter the cynics, if satellite telecast of major blockbusters within 90 days of their release hasn’t diminished or eroded their Box Office returns, why would a variable pricing have any negative impact on collections?
The experiment is definitely worth trying. Why not pilot it on a few select screens in your multiplex? Why not pilot the Variable Window experiment with a much lesser time frame – say 30 minutes prior to the show?
Why not to try and stop playing movies for empty seats? Why not to try and increase the ARPS (Average Revenue Per Seat)? Why not to try and change the game?

2 comments:

  1. Good thought Himanshu and well articulated. In fact, I've often suggested such an approach to my clients in the hospitality industry too! One example:

    For a 12 noon check-out time, hotel room prices (depending on the time of reservation and check-in could be):

    12 noon of previous day or prior: Rs.3000
    3 PM: Rs.2,750
    6 PM: Rs.2,500
    9 PM: Rs.2,250
    Midnight: Rs.2,000
    6 AM: Rs.1,500
    9 AM: Rs.1,000
    11 AM: Rs. 500

    This would allow options for a wide range of needs from those needing a room and bath after an early morning flight, to those needing the room for a quick one hour / two hour meeting , to those coming in late on a red-eye, to those who need confirmed bookings for stay during a business trip. And allow the hotel to profitably increase occupancy rates.

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  2. Couldn't agree more Ashish. Yes, ultimately the business of every business is to do more business. Any Business can not afford to be snobbish and claim that we aren't here for numbers. Even Mercedes in India (who is now feeling the heat from both BMW and Audi). Volumes, footfalls, eyeballs, Page visits is the name of the game.

    It's time the Leisure and Hospitality industry starts bringing in those numbers - by hook, crook or having an analytical look! The way Mahindra Holidays is doing it!

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